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Inclusive innovation, green jobs and the informal sector

The informal economy – defined by the International Labour Organisation as being made up of mostly household and small un-registered enterprises - tends not to get much attention in national economic plans.

The informal economy is, however, a hugely important sector, accounting for over half of global employment and as much as 90% of jobs in some developing countries. It is also, however, the place where workers carve out livelihoods without secure employment contracts, social protection or representation, often for low returns in difficult and sometimes dangerous conditions. Anything that can improve working conditions and provide increased and more stable incomes for informal workers then is clearly important.

Employer of many

In recent years, the emphasis given in economic policy to growing ‘green jobs’ reflects widespread recognition that the current development path the world is following is environmentally and economically unsustainable. Policy focus is often on what can be done in the formal economy to create green jobs and to reduce the environmental impacts of industry and transport. However, the operation of the informal sector also impacts hugely on the state of the environment. Globally, the informal sector employs 30m people in mining, 20m in waste recycling, 50m in forestry and 50m in fisheries, as well as the majority of the one in three workers around the world who rely on agriculture for a livelihood. To be effective then, green economic policies need to look at the creation of green jobs in both the formal and the informal sectors.

Something for everyone

Interest in ‘inclusive innovation’ has risen in recent years, in response to the idea that the 4bn people in the world on an annual per capita income of less than US$1,500, the so-called ‘Bottom of the Pyramid’ (BOP), might represent a multitrillion-dollar market opportunity for corporations. This has led to attempts to rethink business models and a degree of what has become known as ‘frugal innovation’ as companies try to strip down, simplify and make their products appropriate and affordable for BOP customers. Alongside top-down approaches to innovation for the poor by companies, instances of bottom-up inclusive innovation by poor people themselves have also garnered attention.

The idea that inclusive innovation focused on the creation of green jobs in the informal sector might have the potential to deliver significant poverty and environmental benefits is an intriguing one. It is also one for which there is some evidence. Take the off-grid energy sector for example, where widespread and dramatic innovation has been aimed at BOP consumers in the developing world. Innovation in solar power has been particularly fast-paced, with an increasing array of portable solar powered lamps and small solar home systems that can power a number of lights, charge mobile phones, and even power a small TV or fan. Rapid improvements have been made both in efficiency and costs. A small standalone solar lamp that cost US$20 in 2010 can now be manufactured for just US$4 while modern LEDs have replaced incandescent light bulbs in all new off-grid solar products. This has allowed manufacturers to achieve the same performance with a solar cell, around 40% of size required just a few years ago.

These innovations have, in turn, offered new opportunities for green jobs. The International Renewable Energy Agency projects that the off-grid renewable energy sector will create 4.5m direct jobs globally by 2030, 2.9m of which will be in the deployment of solar home systems and solar lamps. Bangladesh demonstrates what a mature sector might look like for solar home systems, with 4.5m systems installed to date and 700,000 in 2015 alone. The sector currently employs an estimated 127,000 people.

The wider field

Opportunities to create green jobs in the informal sector are not limited to energy. Organic agriculture offers a route to improving the livelihoods of smallholder subsistence farmers whilst delivering environmental benefits. The innovation here avoids the use of costly and damaging chemicals and fertilisers, focusing instead on building soil fertility through diversified farming and techniques such as crop rotation, intercropping, composting, bio control of pests and soil and water conservation. Uganda is an interesting demonstration of the potential benefits. Organic agriculture started to take off after the Swedish International Development Agency established a programme which ran from 1997 – 2008, providing training and advice to farmers, export links, and assistance with international certification process necessary for produce to be labelled as organic. The National Organic Movement of Uganda was formed in 2001 and organic agriculture grew rapidly in the early 2000’s, with the 15,000 certified organic farmers registered in 2003 growing to 400,000 (largely smallholder) farmers cultivating some 350,000ha of land today. Uganda’s annual organic exports increased from US$4.6m in 2003 to US$44m by 2014.

Other ‘green growth sectors’ which show that inclusive innovation could provide both significant environmental benefits and substantial improvements in informal sector employment conditions include: waste processing and recycling, community-managed forestry, and eco-friendly services such as eco-tourism. Whilst not a panacea for poverty, inclusive green innovation in informal sector is clearly an important component of the new green economy.

Simon Trace has over 30 years’ experience working on technology and international development. He was the CEO of Practical Action from 2005 to 2015 and was associated with the organisation during a period of strong growth and rising international recognition for its work, including the annual publication of The Poor People’s Energy Outlook report, which encourages change on energy access, and supplies information to support it. A civil engineer by training, Simon has previously worked for CARE and Unicef and spent 10 years in Zambia and Nepal prior to moving to London to take up a series of positions with WaterAid. In 2016 Simon was awarded a CBE for services to international development.

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